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12.30.2001 00:31
Best face forward
It was a rough year for many top business leaders, but some emerged nearly unscathed
This was the year Ford found a new Ford -- William Clay Ford Jr., who took over the automobile company that bears his name.
The year 2001 was one of failure for Kenneth Lay, who had only known success in his years as chief executive officer of Enron Corp. which filed for bankruptcy.
And it was a year of vindication for Bill Gates, who celebrated as the government's antitrust suit against Microsoft evaporated.
Each of these are among the top business newsmakers of the year as named by Bloomberg News. The list included one woman, Carly Fiorina of Hewlett-Packard Co., and one of the nation's top minority business leaders, Stanley O'Neal.
Some, such as Federal Reserve Chairman Alan Greenspan, are household names. Others, such as Theodore Forstmann, are not as well known.
Jack Welch made the list because he quit as the top boss of General Electric, but also because his book about his success as a CEO made the best-seller lists.
Financier Marc Rich won more fame than he bargained for when he was awarded a presidential pardon.
Here are their stories:
Alan Greenspan
The Federal Reserve has cut the benchmark interest rate 11 times this year to its lowest since 1958 in a bid to stoke the economy.
Critics said it was too little, too late for Greenspan, 75, lionized by much of Wall Street for his role in safeguarding the 1990s economic expansion.
Greenspan did anticipate a slowdown. The Fed cut interest rates a half-percentage point two times in January and again in March, the month the National Bureau of Economic Research has since said marked the recession's start.
Markets have rebounded, anticipating a recovery next year.
The Dow Jones Industrial Average has risen 21 percent from its post-Sept. 11 low and the Nasdaq Composite Index 35 percent.
The benchmark rate now stands at just 1.75 percent, and inflation may be a risk once the economy rebounds. Greenspan faces another dilemma: While interest rates on overnight loans have dropped 4.25 percentage points this year, the long-term rates people pay for home loans have only fallen about a half percentage point.
"Because everyone thinks Alan Greenspan will make it all right, it's holding long rates up," said William Dudley, chief economist at Goldman, Sachs & Co.
Perhaps it's still more irrational exuberance.
Kenneth Lay
"The best time for the succession to occur is when the company is doing well," Enron Corp. Chairman and Chief Executive Officer Kenneth Lay said in December 2000, as he handed over the CEO title to Jeffrey Skilling, his long-time apprentice at the Houston-based company.
Lay, 59, had reason to be confident. He had taken a gas-pipeline outfit and turned it into the world's biggest energy trader, with $101 billion in sales last year and good enough to rank seventh among the Fortune 500. Lay was even touted for a top job in the administration of the new president, George W. Bush, an old family friend.
"Enron is uniquely positioned to be the GE of the new economy," Donato Eassey, Merrill Lynch's energy analyst, said in February. "This isn't a management team to bet against."
In August, Skilling resigned for what he called "personal reasons." The bombshells exploded two months later: Enron's partnerships had hidden billions of dollars in debt; years of profits had been exaggerated; and the Securities and Exchange Commission was investigating.
This month, after a failed attempt to sell itself to Dynegy Inc., Enron filed for in Bankruptcy Court from protection from its creditors and cut 4,300 of 7,500 jobs at its Houston headquarters. Enron stock now trades around 40 cents after peaking at $90 last September.
Lay will end up going to Washington after all -- to testify before a Congressional hearing Feb. 4.
Bill Gates
Microsoft Corp. and its founder, Bill Gates, 46, had the look of a pair of has-beens a year ago. Shares of the biggest software company had plunged 63 percent, making it the second-worst performer in the Dow Jones Industrial Average.
Gates, who turned over daily management to focus on developing new software, showed that perseverance pays off: Not only has Microsoft reinvigorated its product line, but the company survived a three-year antitrust battle in one piece.
A U.S. appeals court in June threw out a ruling splitting the company and upheld a lower court's finding that Microsoft abused the monopoly on its Windows computer operating system software.
Last month, Microsoft settled with the Justice Department and nine states, escaping without having to strip out any programs from its Windows software. Nine states want tougher remedies, but they don't ask for a breakup of the company.
Gates, known more as a business strategist than an innovator, went on the offensive with revamped products. A new version of Windows is loaded with features that may help Microsoft command a bigger piece of the Internet.
Last month, Gates introduced Microsoft's first-ever game console, the Xbox. The company's shares have risen 54 percent this year, best in the Dow and in the top 10 for the Nasdaq 100.
And, of course, Gates still is the world's richest man.
Carly Fiorina
Remember the "Cult of Carly?"
Two years after a Forbes magazine article placed Hewlett-Packard Co. Chief Executive Officer Carly Fiorina among the front rank of celebrity CEOs, she's just trying to hang on to her job.
In September, Fiorina gambled on a plan to buy rival Compaq Computer Corp. for $25 billion in stock, saying the combined company would challenge industry leader International Business Machines Corp. in services and take a bigger slice of the personal-computer market.
Investors shunned the plan, driving down Hewlett's shares 19 percent and Compaq's 10 percent the day after it was announced.
Hewlett's largest shareholder, the David & Lucile Packard Foundation, said this month it will oppose the purchase. Many investors consider Fiorina's plan, and her tenure at Hewlett, all but finished. The stock price is less than half what it was when she was appointed in July 1999.
"She talks a big game, but she's been at Hewlett two years and she hasn't shown us anything to prove that she can pull it off," said Bruce Garelick, an analyst with Loomis Sayles & Co., which owns shares in both companies.
Fiorina, 47, had tested investors' patience with a failed plan to buy PricewaterhouseCoopers LLC's consulting unit for as much as $18 billion and four earnings disappointments.
William Clay Ford Jr.
Ford Motor Co. Chairman and Chief Executive William Clay Ford Jr. was supposed to be the nice guy who brought environmental values to the second-largest automaker, not the one who ousts his hired hand.
Facing mounting losses and tire recalls that eroded public confidence in the Explorer sport-utility vehicle, Ford in October replaced Chief Executive Office Jacques Nasser. That brought an abrupt end to a plan to let Nasser run the company as Ford focused on pet projects such as fuel efficiency and the environment.
Now Ford, 44, the great-grandson of founder Henry Ford, must reverse declining market share and shore up profits at a time the company is using zero-interest loans to boost sales.
He'll have to start with the basics.
Ford had five recalls in five months last year after introducing the Escape sport-utility, and delayed the 2002 Explorer this year to prevent defects -- then recalled it twice in its first three months on the market. Ford's market share has dropped 2.8 percentage points to 22.1 percent since Ford and Nasser jointly took over in 1999.
Ford has one advantage over Nasser that ensures his survival: His last name.
Jack Welch
Jack Welch, 66, finally took his victory lap, retiring after 20 years as General Electric Co.'s chairman and chief executive.
His exit from the world's most valuable company didn't quite go as planned.
European regulators blocked General Electric's $47 billion bid for Honeywell International Inc. in July, costing Honeywell CEO Michael Bonsignore his job and embarrassing Welch, who had delayed retirement to oversee the purchase. Welch, it turns out, hadn't bothered to check with European Union antitrust officials to see if they would bless the deal.
It was only a blemish in the career of Welch, who increased General Electric's market capitalization to $400 billion from $15 billion, earned investors an average annual return of 24 percent and populated some of the world's top companies with executives trained in his management style.
In October, Welch's memoir,
Jack: Straight from the Gut,
hit number-one on the New York Times bestseller list, and he joined the leveraged buyout firm Clayton, Dubilier & Rice Inc. as a special partner.
It's an enviable arrangement: "He will share in the equity but not the operating responsibilities of a partner," said Donald Gogel, the firm's chief executive. Welch also signed on as an adviser to J.P. Morgan Chase & Co.
Stanley O'Neal
Stanley O'Neal stands to become the first black person to run a major U.S. investment bank if he completes his ascension at Merrill Lynch & Co., the biggest securities firm.
O'Neal, 50, was named president in July, putting him in line to succeed Chairman and Chief Executive Officer David Komansky. He quickly solidified his hold on the post, presiding over the biggest purge of rivals at the firm in at least two decades.
Among the casualties: Head of money management Jeffrey Peek and international chief Winthrop Smith, whose father was one of the firm's founders.
Komansky has ceded much of his own power, investors say, giving O'Neal the authority to make cost cuts that will require firing thousands of workers and exiting some markets.
O'Neal has used his status as an outsider to his advantage before. He became the first non-broker to run Merrill's brokerage business in February 2000. In 18 months there, he forced out the well-liked John "Launny" Steffens, cut 2,000 jobs and shifted the brokerage's focus to wealthy individuals from small household accounts.
Merrill may need some of O'Neal's medicine. Third-quarter profit fell 52 percent to $422 million, and margins have lagged rivals as compensation costs ballooned.
Marc Rich
Financier Marc Rich, 66, got the presidential pardon he always wanted on Bill Clinton's last day in office. What he didn't get was an end to his legal headaches.
Rich, a billionaire commodities trader, fled the U.S. for Switzerland in 1983 after he was charged with evading more than $48 million in taxes and violating U.S. trade sanctions against Iran.
Clinton waived the indictments, prompting a public outcry and the start of a criminal investigation in New York.
Federal prosecutors now are looking into whether Clinton's ties to Rich's former wife Denise, a Democratic party donor, led to the pardons.
A U.S. judge this month ordered five lawyers for Rich to surrender documents. He concluded the lawyers had acted as lobbyists to gain access to the White House, ending any claim they had to protection by attorney-client privileges.
Theodore Forstmann
If 2000 was the year of the dot-com bust, this was the year of the telecom bomb. There were few victims of the latter more visible than Theodore Forstmann, head of New York buyout firm Forstmann Little & Co.
Forstmann kept raising his bets on two small telecommunications companies, XO Communications Inc. and McLeodUSA Inc., even as their rivals foundered and the stock tumbled.
By August, both companies' shares slipped to around $2 from $20 early in the year. Forstmann Little was in for $1.6 billion. The shares of both now trade for less than 50 cents.
Forstmann, 61, ranked by Forbes among the 400 richest Americans last year, didn't give up.
His firm agreed this month to invest more than $600 million as part of a reorganization of McLeodUSA and pump $400 million into XO as part of a takeover with Telefonos de Mexico SA.
Both may be big gambles.
"A few years ago, this was a growth stock," Vincent McBride, co-manager of the Credit Suisse Asset Management Global Telecommunications Fund, said of XO. "In hindsight, this was a 10-year, zero-coupon junk bond."
Forstmann hasn't lost everything: Hollywood gossip sheets have said he's dating 36-year-old actress Elizabeth Hurley.
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